Political pressures associated with international migration are evident in many advanced economies. They risk leading to policy changes that could have unfavorable medium-term economic consequences, says Fitch Ratings in its latest Global Perspectives commentary.
Protective measures are undertaken ostensibly for the retention of jobs and the promotion of better economic opportunities for residents are more likely to result in weaker growth and lower national income levels over time. A number of advanced economies, including the US and UK, will be reliant on continued immigration in the years ahead to avoid declines in working-age populations and slower growth.
By 2050, the world’s working-age population is projected to increase by 26%. In the advanced economies (“high-income countries” in UN terms), the working-age population declines by 5% with immigration, and 15% without. Base-case long-term growth prospects are already challenging, and would be even weaker if immigration declines.
One of the foundations of long-term economic forecasting is estimating changes in the labor force, which can be derived from population forecasts broken down by age cohort. UN population projections provide this breakdown and offer several alternatives to their median variant (base-case) outlook, including one in which there is no international migration. The median variant is based on the assumption that current migration levels are maintained until 2045-2050 and then decline gradually by a total of 50% by 2095-2100. The zero-migration projections are based on no migration taking place in any years
Comparing the median variant with zero-migration projections, the most dramatic differences by 2100 are in Canada (an increase of 11% in the working-age population versus a 43% decline), the US (a 20% increase versus a 16% decline) and the UK (a 9% increase versus a 20% decline). The implication is that long-term economic growth rates in these countries are likely to be dramatically lower in the absence of immigration.
Global Perspectives is a monthly commentary series by James McCormack, Fitch’s Global Head of Sovereign Ratings, on key issues affecting the world economy. Read the full commentary go to www.fitchratings.com